For This And The Next Question Assume Earnings Growth Aon Electronics Has Ebit O

For this and the next question (Assume earnings growth): Aon Electronics has EBIT of $200,000, a growth rate of 6%, and faces a tax rate of 40%. In order to support growth, Aon must reinvest 20% of its EBIT in net operating assets. The firm has $300,000 in 8% debt outstanding. A similar company with no debt has a cost of equity of 11% (i.e. rEU = 11%). According to the MM extension with growth, what is the value of Aon’s interest tax savings?

Question:For this and the next question (Assume earnings growth): Aon Electronics has EBIT of$200,000, a growth rate of 6%, and faces a tax rate of 40%. In order to support growth, Aonmust…

 

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